By A.C. Shilton
Mar 7, 2016
Illustration by Jennifer Luxton
When Sierra Nevada Brewing Company was looking for a city to host its new brewery, it had a stringent list of requirements: The city had to be near outdoor recreational opportunities, it needed to be centrally located on the East Coast, and the state’s laws had to be friendly toward craft brewers.
Asheville, North Carolina, seemed like an obvious choice. It’s centrally located on the East Coast, with easy distribution channels to New York and Miami, and outdoor recreational activities are abundant. But it was struck from the company’s list for one key reason. “We didn’t want to go into any city where we’d be within 50 miles of another craft brewery,” said Brian Grossman, Sierra Nevada’s general manager. “We didn’t want to be the 800-pound gorilla that came into town.” While this may seem unusual for a profit-driven business, it wasn’t for a craft beer company.
Since the beginning, craft beer has been about community. Before your neighborhood taproom started stocking hoppy IPAs, before most of us sampled nitro-infused coffee porters, before growlers were part of our dinner party lexicon—the craft beer movement was mostly a loose coalition of home brewers tinkering in their basements and sharing recipes over the beginnings of the Internet. And since beer brews in batches, they needed friends to help drink it. In living rooms and back porches across the country, the gospel of good beer was spread one kicked keg at a time.
“Most professional brewers started as home brewers,” says Julia Herz, craft beer program director for the Brewers Association. She adds that although many small-brewers have turned pro, they’ve largely stayed loyal to their homebrew roots—meaning they believe the best way to brew good beer is through collaboration, not competition.
In the past two decades, craft beer has seen remarkable growth. According to the Brewers Association, in 1994 only 1.3 percent of America’s beer market was craft beer. By 2014, though, it had gulped up 11 percent of market share.
The Straub Brewery in St. Mary’s, Pennsylvania, has brewed beer continuously since 1872. Photo from History-star (public domain via Wikimedia Commons).
In fact, the United States has more breweries now than at any other time in history. The previous record was set in 1873, with 4,131 venues serving beer in local neighborhoods. After Prohibition, corporate consolidation, and the birth of the international beer conglomerate, it seemed the U.S. might never reach that 1873 high point again. But according to the Brewers Association, there are currently 4,144 breweries in America and another 1,800 in the works. (For a closer look at the history of American beer, check out this interactive timeline.)
While the vast majority of Americans still drink large-scale lagers, the fact that craft beer is now a $19.6 billion industry is something even multinational conglomerates can’t ignore.
Macrobrews strike back
Last year, Anheuser-Busch InBev announced plans to buy the world’s second-largest beer producer, SABMiller, together becoming “the first truly global beer company.” AB InBev CEO Carlos Brito wrote, “By bringing together our rich heritage, brands, and people, we would provide more opportunities for consumers to taste and enjoy the world’s best beers … we believe we can achieve more together than each of us could separately.” If the deal goes through, AB InBev will purchase SABMiller at about $67 a share, with a final sale price upwards of $100 billion.
Christopher Shepard, assistant editor of Beer Marketer’s INSIGHTS, Inc., said the deal on its own shouldn’t significantly affect small brewers in the United States. Far more disruptive, he said, is the fact that AB InBev and MillerCoors have been snapping up regional craft brewers in an attempt to capture the “pumpkin peach ale” guzzling set. Ballast Point in San Diego was swallowed up for $1 billion by Constellation Brands, Inc., the company that makes Robert Mondavi wines and Svedka vodka. Last year, AB InBev bought Seattle’s Elysian Brewing. These brands, local tasting rooms and all, are still marketed as local microbrews—you won’t find a single Clydesdale or silver bullet logo anywhere. Shepard said these deals are the real problem for the craft beer industry.
Anheuser-Busch InBev, which owns Budweiser, went after the craft beer industry in this 2015 Super Bowl ad.
All of the small-brewers I talked to for this story shared a belief that they have an obligation to help each other in an effort to beat the big guys. “The craft beer community is up against some enormous companies, which could threaten our very existence,” says Steve Wagner, president and co-founder of Stone Brewing Co., a brewery outside San Diego, which produces more than 300,000 barrels of beer a year and has helped much smaller brewers get started. “Promoting our community as a whole ultimately promotes each of our businesses.”
The ethos of collaboration
Herz can’t think of many industries where a group of businesses with 10–20 employees has so driven the direction of big, multinational corporations. Her favorite example is mountain biking. In the 1970s, a few guys in Marin County, California, modified their bikes to accommodate wider tires and spun off into the dirt. Forty years later, all major bike manufacturers offer some sort of fat-tired bike in their lines, and many of the big brands purchased small, startup companies.
But craft beer is already much bigger than mountain biking has ever been. In 2014, it was a $19.6 billion industry. In contrast, the entire bicycle industry—including road and city bikes—is $6 billion dollars. And the major bike brands never fought to control the market the way Big Beer is currently poised to do.
Bennett Cherry, a professor of entrepreneurism at California State University San Marcos, also struggled to come up with examples of industries where a grassroots disruptor really changed the actions of the big corporations—that’s how rare it is. And while Big Beer has moved to absorb small breweries, Cherry isn’t convinced the craft industry will be absorbed. Many breweries will remain independent. “It’s part of their whole ethos,” he said.
SmartAsset calculated the beer-friendliest cities, partly based on the number of microbreweries. Graphic courtesy of SmartAsset.
Cherry uses craft beer as an example of collaborative and community-based entrepreneurship in his lectures. He points to examples like Plan 9 Ale House in Escondido, California, which received funding from nearby heavy-hitter Stone Brewing Co. “[Stone] should theoretically not be helping a startup; it should be putting up walls,” he says.
But Stone was just returning the favor. Wagner said that years ago Stone sold its first keg to Pizza Port, a “competing” pub brewer that helped Stone with its startup costs.
Likewise, Sierra Nevada did end up expanding to Asheville, but only after the company met with the local brewers association and all the members voted to welcome it to the neighborhood. Now, Sierra Nevada brings trainloads of malt and grain to Asheville and allows smaller competitors to buy from it. Before, the local brewers had to buy grain in bags (a trainload of grain is more than the average small-brewer can afford). Now they can buy at wholesale prices. Grossman said savings are often as much as 50 percent.
In 2014, Sierra Nevada opened its second location, near downtown Asheville, North Carolina. The brewery is expected to produce about 200,000 barrels of beer a year, and cooperates with local brewers to bring in ingredients—like hops—by the trainload, saving on fuel and shipping costs. Photo courtesy of Sierra Nevada.
For Grossman, every beer drinker who converts to the craft segment is a victory for all brewers, regardless of where they drink. “[Craft brewing is] still less than 20 percent of the marketplace,” he said. “If someone goes into their local taproom and tries a craft beer for the first time, that’s a win for all of craft beer.”
Cherry refers to the thinking at Sierra Nevada and Stone Brewing as an “expanding the pie mentality.” Where some entrepreneurs fixate on how to grab their slice of pie, craft brewers are more concerned with how to grow the pie so everyone gets a hearty slice—or pint. “By working together, they’re building a bigger industry,” he said.
Anecdotal evidence suggests the “expanding pie” philosophy is true—that a greater number of breweries can lead to more economic opportunity. In North Carolina, for example, from 2010 to 2014 the number of breweries nearly tripled—from 45 to 120. Twenty-eight of those breweries are now located in Asheville, which has worked hard to offer economic incentives to brewers looking to expand and to create arts and craft districts where tourists can easily find artisanal products and small-batch spirits. In addition, the city has experienced the largest growth in tourism spending (8 percent) from 2012 to 2013 out of all 95 state counties, according to Steve Morse, an economist and director of the hospitality and tourism program at Western Carolina University. “I’m sure the local craft beer industry and tours and events had something to do with that increase,” he said.
Brewing community roots
If you frequent Six Rivers Brewery in California, you know that almost every month involves some sort of weeks-long charity fundraiser. It’s one of the reasons why the brewery was the McKinleyville Chamber of Commerce’s Business of the Year for 2015. And it’s hardly an anomaly in the brewing world. According to a survey conducted by the Brewers Association, the average craft brewer is donating about $3.25 to charitable causes for every barrel brewed. That’s way more than big brewers give. Data obtained from AB InBev show that its charitable foundation giving averaged just $0.35 per barrel.
“Brewers are not just opening up businesses to run a profit; they have a different version of the American Dream—one where you can use your brewing as a platform for improving your community,” Herz said.
Of course, these platitudes are coming from craft brewers and craft advocates. But even Big Beer corporations get that community is important to this movement—that’s why they’re buying their way in. Almost every single craft brewer that AB InBev and MillerCoors have purchased has had two things in common: a strong regional following and a local community taproom. While buyouts in other industries can often mean the acquiring company consolidates by shutting down local operations, that hasn’t generally happened with the craft buyouts. For example, Goose Island, which was purchased by AB InBev in 2011, has maintained its Chicago brewery, brew masters, and taproom.
A Saison release party at Allagash Brewing in Portland, Maine. With 17 microbreweries—one for every 4,000 people—Portland has the highest number of microbreweries per capita (followed by Asheville). Photo courtesy of Allagash Brewing.
Still, Herz and others think that most craft beer drinkers are smart enough to sort out which brewers are really invested in their communities and which are simply sending checks to transnational bank accounts. And they may even be powerful enough to stop the $107 billion merger from going through.
On December 1, a group of beer lovers filed a lawsuit against the pending merger. At first, San Francisco-based lawyer Joseph M. Alioto said he was mainly fielding calls from concerned brewers, but then beer enthusiasts started calling too. Currently the case lists 23 plaintiffs, all beer enthusiasts concerned that the merger would violate antitrust law. “The king of beers is really the monopolist of beers,” Alioto said. For its part, AB InBev has said the lawsuit is without merit. “The U.S. beer market has never been more competitive, with strong growth from craft brewers,” said John Blood, vice president of legal and corporate affairs, in a statement. “Nothing in this transaction will change that fact.”
Still, Alioto said he wouldn't be surprised if more beer enthusiasts join the suit. If there’s one thing the craft movement has been good at, it’s organizing.
At this moment, the brewers in Asheville—who, over the years, have organized for everything from fairer beer laws to a more walkable city—are likely gathering around a keg of pumpkin peach ale to plot how to make the next decade as prosperous as the last.
The 2015 Budweiser Super Bowl commercial became a meme passed on by small-brewers from Louisiana to Oregon.